Thanks to the support of the industry, we've matched our £10k target in less than 24 hours! We're now raising extra funds to try and secure our mid- to long- term financial future.
Four and a half years ago I launched a business that would fill a gap in the trade media and provide jobs to four under-30s who, otherwise, wouldn't have one. From a standing start we made a thin but credible profit in each of our first three years. Proudly, we turned to Barclays to discuss lending options. There began the start of a long line of rejections from banks and funding organisations that has led to the stage where we're on the verge of folding a perfectly credible business.
We're often told how amazing it is that we have made it this far, given that more than half of all businesses fail by the end of their third year. The money we required was to recruit a salesperson and redevelop the website, creating new but vital revenue streams by introducing targeted advertising and subscriptions. By this stage we had bartered for office space on Fleet Street and were ready to surge forward: we had the team, the vision and the visibility to make a go of it.
But instead of lending to us, Barclays turned us away. Actually, they demanded that we rewrite the business plan five times, on each occasion providing a different excuse for why they wouldn't extend a loan to us. I, as a director, do not own security. We are not a manufacturing business. I didn't conform with the requirements of the Enterprise Finance Guarantee; I don't have a good enough credit rating. Finally, and most insultingly, was the accusation that we had not reinvested enough money into the business: that the £10,000 'paper profit' we had made, effectively the only money I could draw as a director, and that my time, sweat and toil to create a business and jobs out of nowhere was simply not worth remunerating.
We have trodden water ever since, trying everything we can to keep moving forward: new sales initiatives, alternative lenders, drastic decisions. Having lost various windows of opportunity we were forced to take calculated risks; resultantly, the small financial hole I had predicted has only widened due to our inability to secure vital funding when we needed it. Now, staring down the barrel of a gun I have tried to shoot in every other direction, I must acknowledge that, unless we can raise sufficient funding, we must fold on Friday.
It requires only scant research to realise that too many businesses find themselves in our position, and that the government's commitment to us over the last five years has been hollow to the point of disingenuous. Despite Cameron, Cable and others directing banks to lend to entrepreneurs, a KMPG report in September last year showed that SME and individual lending had decreased by 14 percent over the last five years, representing £309 billion that is no longer available. HM Treasury's own documents show the rejection rate for first time business borrowers is 50 percent.
That goes some way to explaining why, according to a report by insurance group RSA in the Daily Mail, less than half of all new businesses started since 2006 have made it to their fifth birthday. Those who launched in the recession fare worse; a quarter of 2008 launchers failed before the terrible twos, and 14 percent of 2010 start-ups – the same vintage as Output – didn't make it past twelve months.
This can be attributed to a lack of credit, but also to the withdrawal of vital support services and the announcement of pyrrhic initiatives. Consider the British Business Bank: it does not help small businesses directly, but instead provides government-backed cash to lenders who will, or are supposed to. These include the major banks, who account for some 80 percent of all UK financial relationships, as well as alternative lenders, such as Funding Circle. It claims to have 'supported' £829 million of loans for 35,000 businesses as at November 2014; specifically its Start Up Loans programme had provided £130 million to 25,000 businesses by January this year. The figures don't correlate directly, but we can surmise that the remaining £700 million was divvied up between around 10,000 businesses, mostly via traditional channels.
The full impact this ever-tightening snake is in the creation and building of assets. As we have been told repeatedly – by Barclays, Funding Circle, ASC Finance officially and dozens of others unofficially – the only way to secure credit and assure a lender of serviceability is to own assets, either personally or within the business. But companies like mine – those in the service sector, representing 73 percent of all in the UK – do not build such assets easily, and certainly not in their first three years of operation.
And people like me, aged between 18 and 35, are less likely than other generations to have the collateral against which a loan can be secured. Even alternative lenders – and I single out Funding Circle for refusing me twice on the same point – use assets as their main criterion. It is impossible to create wealth unless you have wealth already.
We start businesses for a variety of reasons, from necessity to opportunity, wealth or job creation to a simple vision of making things better for people or organisations. In my case, it was a combination of them all. Four years ago I had an idea to provide a better editorial voice for the creative visual communications sector, offering new promotional opportunities and an information service for this industry. We have been continually lauded for our efforts by small businesses, vendors, organisations and manufacturers. We have become the 'challenger brand', according to one PR specialist, furthering important agendas, regularly beating all competitors world-wide to be first out with the story, and now notorious for talking about the issues that others won't.
The initial plan was much broader, and I almost laugh now as I consider it: to use print-on-demand technology to change the way that we publish information. When we rewrote our business plan in January 2014 at the behest of Barclays, it demonstrated that our partners for this project included some of the world's largest and most exciting technology companies, and that we were uniquely positioned to bring them together to bring publishing in line with the needs of the modern reader. Instead, we were told that 'print and publishing are dead', belittling everything we have built and the vast, vibrant sector it hoped to change. Our figures, based on creating sustainable promotional opportunities for vendors across print, digital and manufacturing, were summarily ignored. Even our excellent bank manager – who has fought our corner every step of the way – and his protestations on our behalf were dismissed. The computer said no and it would not budge.
Without funding, we won't be able to address the issues faced by our readers, for example, the massive skills gap faced in the UK graphic communications sector or, ironically, the effect in this industry on a lack of small business funding. We will have to stop being the main provider of high-quality video content; we will no longer be the voice of the communications sector.
We have seen a massive groundswell in support from the industries that we cover in the last 24 hours, both online over social media and through emails and phone calls to the team. Now we're hoping that – with your support – we can raise the money we require to keep Output going and help it realise its potential as a vital media outlet for the visual communications industry.
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